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CMOs should embrace procurement

John Butcher
Jul 15, 2015 11:28:00 AM

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CMOs should embrace procurement

The length of a relationship between marketing agency and client is often a relatively accurate measurement of a successful partnership. Though every agency-client relationship is structured differently, particularly now with so many specialist agencies in the market, recent studies suggest a typical contract length is in the vicinity of three years. That’s not a very long time, particularly when compared to the typical relationship length between company and legal representation or company and auditing firm (and also when taking into account the time it takes to on-board a new agency).

What are the drivers of change? Buyers who feel that the outputs are not in proportion to the costs, will trust the agency less and will move to another one. Perhaps the clients feel exposed in front of senior stakeholders by the poor quality of work completed by agencies, particularly as marketing budgets now come under even more scrutiny from senior executives across the business, and by the board.

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Whatever the case may be, the reality is companies are shopping for new agency service providers with relative frequency.

In sizeable organizations, procurement is usually involved in some form when a sourcing need arises, whether it is for material goods or support services. Traditionally, however, procurement has played a minimal role in helping organizations find and secure marketing services, usually only entering the process towards the end when it becomes time to haggle over price. Why? CMOs tend to have a pretty tight grip over their budget and they often exclude procurement from the ‘solution shaping’ phase. They exclude procurement teams from their process largely due to a scepticism of procurement's value-add and a disconnect between procurement’s objectives, usually defined by cost savings, and marketing’s objectives, which are tied to business goals and brand.

But this is a mistake.

True value can be realized on both sides of the client-agency relationship when procurement is engaged from the beginning of the planning stage by marketing teams, acting as an intermediary between agency and client, and is engaged on an ongoing basis thereafter. Here’s why:

  • Measurement and accountability: Procurement’s expertise is in deriving the greatest possible value and innovation from suppliers of all types, and holding them accountable for performance. During the budget planning and deliverable setting stages, the CMO should leverage procurement’s abilities to help marketing teams establish performance metrics and weave those into the contract, holding agencies accountable for the metrics they provide. In this way, the CMO and CFO can gauge the true effectiveness of each segment of their budget.
  • Breaking the silos: Marketing’s core focus tends to be the end user. But in reality, they need to be more in touch with all elements of their business and have a deeper understanding of broader goals. Procurement is already there. Procurement is already working with different business units and sector leaders and can share insights and useful intelligence that can help improve marketing’s reputation and performance across the business.
  • Driving insight: Today more than ever, marketing campaigns are driven by the availability of Big Data. Metrics not only assist in gauging the effectiveness of a campaign, they are used extensively for campaign targeting and timing. For this to happen effectively, marketing needs to rely on IT and, by extension, procurement to help establish the necessary systems and platforms that collect and aggregate data and yield useful and actionable analytics and insight.

While there is certainly a role to play, procurement should not be involved in all facets of the company-marketing agency relationship and should steer clear of things such as development of overall marketing strategy, judgment of the creative output of agencies and whether agency output satisfies requirements. CMOs may find it useful to use procurement as an independent sounding board, but it should be up to each individual CMO to assess if procurement could add value in these areas (and would be considered the exception rather than the rule).

The onus is on both sides of the equation to come together with a more open and collaborative mindset for the good of corporate objectives. Procurement ultimately needs to be more proactive in seeking to support marketing earlier in the planning process. This means procurement teams need to move conversations beyond how they can help drive costs down at the end of the supplier selection process, and proactively align themselves with wider commercial aims and challenges at the start. CMOs need to open their thinking to the idea of including procurement as they engage in new marketing agency relationships and manage those over time. When suspicions are removed and each team’s skills and core competencies are leveraged to the fullest extent, the best can be extracted from marketing services suppliers - leading to longer lasting and more mutually beneficial relationships.

Is your marketing function embracing procurement? Join the webinar to learn how to align marketing and procurement to help drive better commercial outcomes from your digital marketing spend.

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